Ocado has seen a big rise in sales and is planning a major investment programme despite a tough environment for retailers.

The online grocer’s sales in the 12 weeks to the February 22 rose 19.2 per cent compared with the same period last year, though the average order size reduced by 2.4 per cent, reflecting tough competition in the grocery market.

Ocado’s update came as data from analysts Kantar Worldpanel show the price of a shopping basket is falling at a record rate of 1.6 per cent.

Delivering results: Ocado has seen a big rise in sales and is planning a major investment programme despite a tough environment for retailers

The shrinking cost is due to a price war between the big food retailers coupled with low inflation.

‘Customers are benefiting from lower prices. They are consuming just as much, but paying less,’ said Ocado finance director Duncan Tatton-Brown.

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Shares, which are up more than 200 per cent over the past three years, gained another 5.6p to 376.1p.

Tatton-Brown claimed Ocado’s £216million deal to run Morrison’s online operation is safe in the wake of Dalton Philips’ departure.

‘We know how happy they are with the service,’ he said.

Ocado has set a target of signing its first international deal by the end of the year and plans to increase the number of employees in the UK to 11,000 from 8,500. ‘We are not focused on short term profit, we want to create value for shareholders over the long term so we will invest heavily to grow business in the UK and internationally,’ said Tatton-Brown.

In the bag: Ocado’s update came as data from analysts Kantar Worldpanel show the price of a shopping basket is falling at a record rate of 1.6 per cent

The Kantar analysis showed that troubled Tesco is bouncing back despite a difficult backdrop.

It put in its strongest performance for 18 months, with sales up 1.1 per cent.

Discounters Aldi and Lidl both increased their market share. Asda sales dropped by 2.1 per cent, Sainsbury by 0.5 per cent and Morrison by 0.4 per cent.

It is expected to reveal its profits have halved from last year’s £785million when it presents its full-year results on Thursday.

Morrisons is also likely to slash the dividend by as much as 40 per cent.